As a small-business owner, you are faced with rising costs, particularly employm

Question

As a small-business owner, you are faced with rising costs, particularly employment costs, insurance, et cetera. So, you decide to hire some friends and pay them as they work, rather than go through the expense and procedure of bringing in “actual” employees. Your friends wear the business uniform, deal with vendors and customers, and tell friends and family that they work for the business. One friend / employee orders way too much from a vendor. The vendor has dealt with the person numerous times; in fact, the person has been ordering from the vendor for months. Since the person who ordered was not an ”employee,” but a friend you hired, are you liable to pay for the improper order? Discuss the implications of agency that apply in this situation, and describe at least one (1) way the company may be able to cancel or return the order in question. Be sure to support your legal analysis with concepts and definitions from the reading.

Explanation / Answer

The small business owner has hired a few of his friends on the basis of “pay them as they work”. It is a contractual agreement as per the Contact Act though it may not be in writing. His friends act on behalf of the principal owner in different form as mentioned in the case scenario. Thus, his friends become agent under the agency law.

After becoming an agent, they have “duty to indemnify” from the principal side. It also needs to be examined whether the business owner has communicated the authorization of the agent to the vendor. If doing so, the business owner is vicariously liable, under the respondeat superior doctrine.

The company can cancel the order if it does not meet the quality specifications and or terms & conditions mentioned by the company at the time of ordering process. Charging excessive pricing above market rates and evidence of offering personal benefits to the agent also makes the legal basis for cancellation of the order.

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